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Tuesday, 4 October 1983
Page: 1305

Mr HOWARD(10.16) —In the time available to me I would like to say something about the administration of foreign investment policy under the Hawke Government. I start by saying that I believe that the administration of foreign investment under this Government has been needlessly tightened. This change of policy has been unhelpful to Australia during a difficult economic period. It has given the wrong signal to many overseas investors and it has created unnecessary concern in the minds of potential investors in this country at a time when the Government should be bending its efforts to making this country even more attractive for overseas investment. I do not believe that the change has yet gone so far as to put the administration of foreign investment policy in the same order as that which obtained under the previous Labor Administration. It is still within grasp and the capacity of the Government to adopt a more realistic approach in the administration of foreign investment policy and to prevent its developing a permanent view in the eyes and minds of some overseas investors that foreign investment, having been very welcome in this country on a bipartisan basis allegedly for a number of years, continues to be welcome.

I would have thought that in 1983 the arrangements in favour of large-scale foreign investment in Australia were beyond serious dispute. This country simply does not generate sufficient domestic savings to finance the level of investment that is required to provide the rising living standards that are desired by so many people in our community. We must face one simple fact: If we did not have large-scale foreign investment in this country we would have to settle for a lower living standard. We cannot have it both ways; we cannot deny the entry of foreign investment in this country yet expect our living standards to be at the level they are and, indeed, to rise to higher levels. In this context I find it slightly incongruous that a government that on the one hand is adopting a somewhat tighter approach to foreign investment than we did when we were in office on the other hand should take away the tax incentive for the first $1,000 of equity investment that was announced in the last Budget, which would have been an incentive to the generation of a larger level of domestic savings.

So I put it to the Committee that there has been a shift in foreign investment policy under the Hawke Government. It has not gone far enough yet to sound a real alarm, but there are some disturbing elements. I hope that in the interests of the maintenance of a high level of bipartisanship in the area of foreign investment it is possible for this tendency to be reversed. I understand that there is outstanding to the House a promised statement from the Treasurer (Mr Keating) about the review of foreign investment policy. I hope the Treasurer takes the opportunity to inform the business community, the public and the Parliament of precisely where this Government stands on the question of foreign investment. In case anybody imagines that the views I am expressing during this debate are mine alone, I remind the House of a number of articles that have appeared in the Australian financial Press from as early as 20 April this year. An article appeared on that date in the Australian Financial Review under the heading 'Foreign equity rules tightened'. Articles were run over the months following that, most of which indicated that there was a tightening of foreign investment policy.

Of course, the Minister Assisting the Treasurer (Mr Hurford), in his very roundabout way, in answer to a question I asked in the House the week before last, confirmed that there had been a change of foreign investment policy. He was a little coy about it. He said that there had been a slight shift. But in reality he was a little more honest when he was interviewed by Australian Business when, in answer to a question, he said:

. . . and Treasury's Foreign Investment Division are doing a faithful job and are anticipating the political view.

In other words, they are anticipating a somewhat different view of the Labor Party towards foreign investment. I think that there are three significant investment proposals which illustrate the point that I am making. The most prominent example of a change of foreign investment policy was the decision of the Treasurer to reject the Citicorp-Grindlays Australia Ltd proposal some several weeks ago. That proposal, which, if accepted, would have resulted in a larger local ownership in the merchant banking sector, was a very peculiar decision. It was very hard to reconcile that decision with the application of foreign investment policy that had gone on under the previous Government. Given that it was in an area where, if anybody has any understanding of the market, it is to be conceded that it will be very hard to find local participants to join in the process of reducing the level of foreign ownership in the non-bank financial institutions area, it was a very strange decision indeed.

On that occasion, the Government rejected a proposal that would have created a strong wholly Australian owned merchant bank. It is widely recognised that rationalisation in the merchant banking industry is needed. I might say to the Committee that that state of affairs was recognised to me on many occasions whilst I was Treasurer by the advisers I had then and who have continued as the Government's advisers in this area. The conduct of policy and the precedents clearly provided for approval on that occasion. It was a very strange decision on the part of the Government that it found itself unable to make that particular approval.

I think the point has has to be made that, when a Minister has a responsibility to administer foreign investment policy, that Minister is vested with a certain amount of discretion. Foreign investment policy has to be administered according to changing economic circumstances. Quite clearly, when the country is going through an economic recession, when there is a premium on employment maintenance and on rationalisation, the policy ought to be administered in a flexible way according to those requirements. That was certainly the approach that I adopted in the five years when I was responsible for foreign investment policy. Correspondingly, when the level of foreign investment in this country was running at a much higher level and when there was a surge in resource investment in this country, the circumstances allowed-perhaps I can use the expression-a tougher application of the foreign investment rules.

I remind the Committee that, during the period when I was Treasurer, the Government did not hesitate to insist very strongly on a 50 per cent local ownership in the two very large coal projects at Oaky Creek and Blair Athol in Queensland, which were recognised by students of foreign investment policy as being acid tests of whether the then Government was prepared to apply the foreign investment rules. I would argue that what is needed at present is a very flexible application of our foreign investment policy. What I fear is happening is that the Government is being a little too doctrinal in the application of foreign investment policy. I do not want to put it any more strongly that that, firstly, because I think it would be unfair to criticise the Government any more strongly than that and, secondly, I do believe very firmly that a bipartisan approach in foreign investment is very desirable in Australia's interests. Whatever our extreme doctrinal views may be about foreign investment, it is very important that potential investors in this country believe that there is a certain continuity of foreign investment policy and that the rules will not change in an ad hoc way when there is a change of government.

I conclude my remarks by saying that I do not argue that foreign investment policy has gone back to the days between 1972 and 1975, when it was positively unwelcome, but I believe that there has been a shift. It has been a shift towards a tighter application. It has taken place at a time when, if anything, there should have been a shift towards a looser application. At the moment we are looking for investment. We are looking for decisions that will save jobs, promote rationalisation and, above everything else, encourage investment. As we are frequently reminded in the rhetoric of the Prime Minister (Mr Hawke) and the Treasurer, it is, after all, private sector investment that holds the key to economic recovery and job generation.